The “2010 Low-carbon Economy and Carbon Finance Development Forum” was successfully held in Shanghai on January 16. The event was attended by Zhang Ning, Director of the Shanghai Securities Regulatory Bureau, Yan Xu, Vice Director of the Pudong New Area and Yang Maijun, General Manager of Shanghai Futures Exchange (SFE).
At the forum, “clean energy sources”, “energy conservation and emissions reduction”, and “low-carbon finance” were the key words in the discussions between the participants. Futures trading of carbon emission rights, which has emerged in Europe and America in recent years, has also become the focus of the forum. More and more experts agree to the use of market-oriented measures like financial innovation and financial instruments to gradually control global emissions.
According to available data, since the Industrial Revolution, human activities and the burning of fossil fuels have continuously increased the concentration of greenhouse gases like CO2, CH4. At the current rate, it is expected that the average global temperature will increase by about 2 centigrade in 100 years, which will seriously threaten the survival and development of human beings.
Dr. Richard L. Sandor, Chairman and CEO of the Chicago Climate Exchange (the initiator of futures transactions of emission rights) promoted his mode of cutting emissions via carbon trading in his speech, and believes that the actual effects of encouraging independent emissions reduction by economic measures is far better than the government apportioning emissions reduction indicators to enterprises with administrative measures. The financial market will play a significant role in encouraging a low-carbon economy.
Many experts and scholars recognize the role of finance in the pricing of carbon emission rights. Dr. Liang Meng from the Research Bureau of the Headquarters of the People’s Bank of China believes that establishing the carbon futures market is more important than the carbon spot market. Determination of carbon price mainly depends on the futures market. China will only have a say in carbon prices after it has established a futures market.
Lin Jian, General Manager of the Shanghai Environment and Energy Exchange, pointed out that China has become one of the largest energy consumers in the world. China’s carbon emissions rank extremely high. Although we have tried to reduce emissions through legal and administrative means, the results have not been so satisfying. Following in the footsteps of the international market in establishing a carbon futures market might be a good attempt. China can make some explorations in this field at the least.
Yang Maijun: SFE will try futures trading of carbon emission rights
At the “2010 Low-carbon Economy and Carbon Finance Development Forum”, Yang Maijun, General Manager of the SFE, held that SFE will keep on studying and exploring the feasibility of futures trading of carbon emission rights, controllability of transaction risks and the reliability of risk monitoring systems. With the purpose of serving the national economy, China’s futures industry take on the challenge of the low-carbon economy, assist in the transformation to a low-carbon economy and grasp the demand of low-carbon economy on financial instruments. China will follow trends and take active actions.
Yang Maijun said that China has been struck with the difficulty of “low-carbon” development during the process of industrialization and urbanization. In 2009, China announced its target to reduce energy consumption per unit of GDP by 40% before 2020. This is a challenge, which needs innovative solution mechanisms, low-carbon financial mechanisms and instruments. It is inevitable that various countries will move away from the traditional economic growth mode of “high energy consumption, high pollution and high emissions”, and explore the low-carbon economic mode of “low energy consumption, low pollution and low emissions”.
Yang Maijun went on to say that at present, defining greenhouse gas emission rights as commodities through property right definition and trading them through market-oriented pricing has become one of the market means of European and American countries to realize emission reduction at low cost. Compared to the trading of common commodities, there are more policy and technical risks in the trading of carbon emission rights. So, the international market increasingly requires carbon financial instruments like futures and options. International carbon trading instruments are becoming increasingly diverse and the carbon finance system is developing continuously. China’s futures market was established to serve the real economy. For China’s futures industry, serving the real economy has become the breakthrough point and key focus of market and business development. We should make full use of the futures market to serve the real economy in its transformation to a low-carbon economy.
China’s carbon finance started late and is still in its initial stages. Judging from the international market, China is still at the bottom of the supply chain, mainly providing cheap carbon resources to EU and Japan. Judging from the domestic market, various spot platforms are being opened in succession. To provide complete deal services, complete mechanisms and rules are still required. Yang Maijun expressed that SFE has started researching the futures of carbon emission rights in 2006, hoping to capitalize on the pricing and risk control function of the futures market to help enhance China’s influence in the pricing of carbon resources and establish a carbon market that meets the domestic demand and complies with international rules. In the future, SFE will continue studying and exploring the feasibility of futures trading of carbon emission rights, the controllability of transaction risks and the reliability of risk monitoring systems.
Yan Xu: Support Pudong’s low-carbon enterprises in public listing and financing
At the “2010 Low-carbon Economy and Carbon Finance Development Forum”, Yan Xu, Vice Director of the Pudong New Area, hopes to actively support SFE in making use of existing platforms to establish a transparent carbon deal market and encourage and support Pudong’s low-carbon enterprises in public listing and financing.
Yan Xu said that the proposal of developing a low-carbon economy and promoting green growth under the new situation put forward in the Central Economic Work Conference is an inevitable path if China is to restructure and transform its economy The “2010 Low-carbon Economy and Carbon Finance Development Forum” jointly held by the Shanghai Futures Association and SFE is conducive to analyzing the difficulties in development and exploring the path towards low-carbon. As the first trial district for comprehensive reform in China, Pudong will explore low-carbon finance.
Yan Xu said that exploration should be conducted at three levels: first, provide active services and support exploring and establishing the carbon emission trading market. Since 2008, China has established several carbon emission trading markets in different places. In all, these carbon trading markets are based on project deals. “We hope to support SFE in making use of the existing platforms and establishing new platforms to establish a transparent carbon deal market.”
Second, encourage and support Pudong’s low-carbon enterprises in public listing and financing. Developing low-carbon finance is a new means of growth and exploration. SFE will seek support from the financial regulatory departments to give priority to a group of low-carbon enterprises for public listing.
Third, enhance policy support to the low-carbon industry, coordinate various resources and jointly cultivate the low-carbon economy. (Source: Shanghai Securities News)